Forecast

Judge holds up Uber settlement with drivers

Bob Egelko| on June 30, 2016

A federal judge withheld approval Thursday of a settlement of $84 million to $100 million for hundreds of thousands of Uber drivers in California and Massachusetts and questioned whether the deal would compensate drivers adequately for the claims they were giving up.

U.S. District Judge Edward Chen of San Francisco did not definitively reject the agreement, negotiated by a lawyer for plaintiffs in a class-action suit against the ride-hailing company, and said he might ultimately find it to be fair and reasonable based on further information or changes in some of its terms. But he said the parties to the settlement had failed to address arguments by objectors — groups of dissident drivers and their lawyers — who said they were being short-changed.

Chen said one claim — that Uber had violated California labor laws by classifying drivers as independent contractors rather than employees, denying them overtime, work expenses and other benefits — could be worth $1 billion or more if the drivers went to trial and won employee status. The state would be entitled to three-fourths of any labor law penalties, which were valued at $1 million in the proposed settlement.

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“The parties should provide more substantial legal authority for why a 99.9 percent discount (in the labor penalties) is warranted,” Chen said. He also said the two sides had assigned no value to claims in other lawsuits — seeking payment for meal and rest breaks, waiting times between rides, and the denial of workers’ compensation benefits — that would be dismissed if the settlement were approved.

The suit, filed on behalf of 385,000 Uber drivers in the two states, challenged Uber’s classification of them as contractors. The settlement would not affect that status, which could be disputed in future cases.

Mark Geragos, a lawyer for a group of drivers challenging the settlement, praised the decision and said Chen rightly “wants to know why (the plaintiffs) think they can hijack claims” in his suit and others.

Attorney Shannon Liss-Riordan, who reached the settlement after three years of negotiations with Uber, said she understands the judge’s desire for more information, and does not think claims that would be dismissed have much value.

“He does not appear to have given credence to some of the outlandish objections that have been made about me personally, or the amount of the settlement,” said Liss-Riordan, whose ouster as lead attorney had been sought by Geragos and other objectors. The settlement initially would have awarded her $21 million to $25 million in attorneys’ fees, but Liss-Riordan recently reduced her proposed share by $10 million.

The settlement would increase from $84 million to $100 million if Uber began selling its shares publicly. Another provision would require Uber, which now can fire drivers at will, to have “sufficient good cause,” determined by an arbitrator, for dismissal. The company would also agree to provide funding for a “driver association” that would discuss drivers’ concerns with managers but would not have the powers of a labor union.

Chen asked for further information from all sides, including a state labor agency, by July 15 before deciding whether to approve the settlement or send the case to trial. His ruling comes a week after another federal judge gave preliminary approval to a similar agreement providing $27 million to 163,000 Lyft Inc. drivers in California.